BALANCING THE STATE BUDGET: IT'S TIME FOR A REALITY CHECK

Federal Bailout Will Help Balance State Budget, But Tough Choices Loom

Three billion dollars. It ain't chump change. Then again, the amount
of money that Washington is getting from Congress to help with its
operating budget shortfall, projected at roughly $8 billion, isn't
what many legislators had hoped for.

While people may have been very optimistic that the feds were going to
come in with dump-truck loads of money, it isn't happening," Gov.
Chris Gregoire told reporters last week.

Washington did get a lot of money from the federal stimulus package -
almost $5 billion. But about $2 billion is going to highway, water,
sewer, school and other construction projects or must be spent on
other things that make it of little direct help to the state operating
budget. For instance, some of the money is passing through the state
treasury but is headed straight to cities, counties, transit districts
and others to help with their budget problems. The state is on a
course to spend $8.31 billion more than it expects to collect in taxes
in 2009-11. To put it in balance, the Legislature must subtract from
spending, add to revenues or do some combination of both. |

Moreover, the $3 billion that is helpful to the state is limited to a
three-year period, and the Legislature already has spent $340 million
of it.

Today marks the beginning of the 10th week of a 15-week legislative
session, and work on the 2009-11 budget will begin in earnest after
Thursday. That's when budget writers get the official estimate for how
much the state can expect to collect in taxes over the next 28 months.

That's also when reality sets in, or when it is supposed to. Sen.
Craig Pridemore, D-Vancouver, said he thinks many of his colleagues
are still in denial about the gravity of the budget crisis.

Today, the state is looking at a projected $8.31 billion shortfall.
That means the state is on course to spend $8.31 billion more through
June 30, 2011, than it expects to collect from state taxes and fees.
That's about 25 percent of the $31 billion the state would collect in
taxes over the next two years.

Not all of that shortfall is spending. Senate Majority Leader Lisa
Brown, D-Spokane, said she thinks the Legislature should keep $1
billion in reserves because the economy and state revenues are so
uncertain. But since that money must be put in savings, spending cuts
will have to be that much deeper.

LOOKING FOR SAVINGS

Lawmakers can cut the shortfall in half with relatively little pain,
unless you are a state or public school worker who won't get a
cost-of-living raise for the next two years. They could:

Spend all the federal money. Not give COLA raises to 250,000 state and
public school employees. Spend all $700 million in the Rainy Day
savings account. Continue spending cuts already made in the so-called
"belt-tightening" bill for the current 2007-09 budget, which was
signed into law a couple of weeks ago. Skip $400 million in payments
into worker pension programs. Take $800 million from other pots of
money that are earmarked for building projects. Open 10 more liquor
stores and hire more "revenuers" to go after tax evaders.

All those moves, which have been suggested by the governor, minority
Republicans or some Democratic budget writers, would whittle the
shortfall down to about $4.5 billion.

After that, the cuts get more painful.

Gregoire balanced her budget by getting rid of a couple of programs
that provide $339 monthly payments and medical coverage to about
16,000 people who are unable to work because of physical, mental or
drug-abuse problems, saving $452 million. She also would save $252
million by cutting the state-subsidized Basic Health Program by 40
percent. Other savings: $400 million in cuts to state colleges, and
$300 million in cuts to public schools. In all, she would cut spending
by more than $2.5 billion, said Victor Moore, her budget director.

The situation the Legislature faces is only slightly worse. Gregoire
assumed the state would get $1 billion extra from the feds; but we're
getting $3 billion. On the other hand, state tax collections are now
expected to be about $2.5 billion less than when the governor wrote
her budget in November.

If all of the governor's spending cuts were adopted, the Legislature
would have to deal with about a $1.5 billion to $2 billion gap between
spending and tax revenues. That assumes Thursday's forecast lowers
revenue collections by another $200 million.

That remaining gap is why interest groups, mostly in the health care
and education arenas, are talking about asking voters to approve
higher taxes at the ballot - perhaps in June, August or November. They
want money to restore services that otherwise would be cut, and their
polling shows voters might be inclined to approve temporary taxes,
particularly if they were "sin" taxes - cigarettes, liquor, candy and
pop.

Republicans, who are heavily outnumbered in both the House and the
Senate, say the budget can be balanced without any new taxes. Cuts
don't have to be as drastic or dramatic as getting rid of entire
programs, said Sen. Joe Zarelli, top Republican on the Senate Ways and
Means Committee.

He was referring to the governor's proposal to end the General
Assistance Unemployable and Alcohol Drug Addiction Treatment Support
Act programs, and a House option to save $700 million by axing the
Basic Health Plan.

TIME TO TIGHTEN THE BELT

Take more measured steps, Zarelli said. Instead of getting rid of GAU,
put a one-year time limit on how long people can get $339 monthly
checks and health coverage. Instead of lopping the health plan,
scrutinize applications to make sure they qualify for state-subsidized
health coverage, he said.

Zarelli said the state should freeze spending at today's levels. Not
all spending can be frozen - utility bills will be higher, landlords
will charge higher rent to state tenants - but state agencies should
be given the same amount of money they got for the past two years and
be told to live with it, he said.

If business can do it and homeowners can do it, government can do it,"
he said.

Jeannie Darneille, D-Tacoma, who is chairwoman of one of three House
appropriations committees, said the three leaders of the committees
would meet Monday with House Ways and Means Committee chairwoman Kelli
Linville, D-Bellingham, to go over their entire list of possible
budget cuts, which were supposed to amount to about 20 percent.

That's when we'll learn whether our ideas are deemed brilliantly
inspired or absolutely crazed," Darneille said last week.

Health care advocates have heard that the general assistance and
substance abuse treatment programs and the Basic Health Plan might be
eliminated, and that state payments to hospitals and nursing homes
might be cut by 10 percent to 14 percent.

If the cuts are like that, they're drastic," said Susan Eidenschink of
the League of Women Voters, which is part of the Healthy Washington
Coalition. "The safety net would be just about demolished."

Cassie Sauer, a vice president of the Washington State Hospital
Association, voiced a similar concern.

They are very scary about where we might be headed in an all-cuts
budget," Sauer said. "The level of devastation to the health care
safety net and to vulnerable people who need health care is immense."

[SIDEBAR]

BALANCING THE STATE BUDGET

The state is on a course to spend $8.31 billion more than it expects
to collect in taxes in 2009-11. To put it in balance, the Legislature
must subtract from spending, add to revenues or do some combination of
both.

POSSIBLE CUTS

$415 million Eliminate GAU and ADATSA assistance programs

$252 million Cut Basic Health Plan by 40 percent

$297 million Don't give state workers raises

$389 million Don't give school workers raises

$401 million Skip employer payments into pensions

$42 million Pay hospitals 4 percent less for state-paid
patients

$125 million Give poor school districts less money

$84 million Eliminate state-paid all-day kindergarten

$61 million Eliminate health coverage for illegal immigrant
children

$123 million Eliminate two teacher training days

$52 million Stop sharing liquor profits with cities and
counties

$364 million Cut class size initiative (I-728) money by 40
percent

$86 million Make state workers pay 20 percent of health
insurance

$80 million Make school workers pay 20 percent of health
insurance

$163 million Freeze experience pay and raises for state and K-12
workers

POSSIBLE TAXES OR REVENUES

$700 million Spend all Rainy Day savings account

$800 million Shift money from building projects

$143 million Open 10 liquor stores, go after tax evaders

$2.3 billion Raise state sales tax to 7.5 percent*

$180 million Raise cigarette tax by $1 a pack*

$277 million Put 5-cent-per-can tax on soft drinks*

$466 million Tax bottled water, 1 cent per ounce*

$377 million Raise property tax by 22.5 cents per $1,000 in
value*

$245 million Double estate tax*

$980 million Extend sales tax to doctors, dentists,
lawyers*

$59 million Extend sales tax to candy, gum*

$783 million Raise oil barrel tax to 5 percent*

* All tax increases require a two-thirds vote by the Legislature or a
public vote. All amounts for spending and taxes are for two years.
These are only a small sampling of spending cuts and tax raising
options available to the state.